Brexit: Legislating for the United Kingdom’s Withdrawal from the European Union

Debate between Lord Bridges of Headley and Lord Higgins

Thursday 30th March 2017 Lords Chamber

[Baroness Couttie (Con)]

My Lords—

[Lord Higgins (Con)]

My Lords, the Prime Minister’s foreword to the White Paper stresses the importance of trying to minimise uncertainty during the negotiations. Does my noble friend agree that among those suffering most from uncertainty are UK citizens living elsewhere in the European Union and those from elsewhere in the European Union living in the United Kingdom? When the Prime Minister approached this in Brussels she was told that she must wait until negotiations had begun and Article 50 had been implemented. Can my noble friend assure us that we will now press ahead with resolving the matter at the earliest possible moment? Should we not be absolutely clear that we must avoid a situation where nothing is agreed until everything is agreed? That would perpetuate the uncertainty for this group of people and many other groups of people for two years or perhaps many more.

[Lord Bridges of Headley]

My Lords, my noble friend makes a very good point. As regards the substance of it, I draw attention to the second point in the “principles for our discussions”, set out in the letter that my right honourable friend the Prime Minister sent yesterday, which repeated our absolute aim to strike an early agreement about the rights of both EU citizens in this country and UK citizens right across Europe. It is absolutely our intention to do so, and it is obviously good news that we can now start that process. We have been heartened by the fact that in conversations with our European partners, they too largely share that overriding intent.

Brexit: Article 50

Debate between Lord Bridges of Headley and Lord Higgins

Monday 7th November 2016 Lords Chamber

[Lord Bridges of Headley]

As I said, I am not going to go much beyond what I said before. I totally respect and wish to protect the independence of the judiciary, and I am absolutely sure that those judges acted in good faith.

[Lord Higgins (Con)]

The Statement seems to imply that the referendum made a decision to leave the European Union. Those of us who served on the Bill setting up the referendum know that that is not so; it was clearly an advisory referendum. It is therefore very important that the Government should not now treat it as a mandatory referendum which would be contrary to and incompatible with our system of representative parliamentary democracy. I think the right thing to do now is to take the advice of the referendum, but it is clear that on the details—the expression “Brexit means Brexit” is totally meaningless—Parliament should be able to take a view on whether to implement Article 50 and go along with the judgment of the High Court.

[Lord Bridges of Headley]

My Lords, the Government are appealing against the judgment of the High Court and believe that the views of the 17.4 million people who voted to leave should be respected. As regards the position of this House, I repeat all the points I said before about the role it has so far had in setting up the referendum and the role it will have in due course in issues such as repealing the European Communities Act.

Next Steps in Leaving the European Union

Debate between Lord Bridges of Headley and Lord Higgins

Monday 10th October 2016 Lords Chamber

[Lord Bridges of Headley]

My Lords, I am sorry to repeat what I have said but the voice of this House and the other House will certainly be heard in the process, as I have already set out. As we go through the negotiating process, I am sure that there will be ample opportunity to question me and my colleagues in the other place about how the negotiations are proceeding.

[Lord Higgins (Con)]

My Lords, is there not always a danger with referendums that they become the dictatorship of the majority and do not take into account minority interests, even when the minority is as large as 48%? Does my noble friend agree that we have a representative parliamentary system of democracy which defends minority interests, and that we therefore ought to play a full role in deciding exactly what was meant by the result in the referendum? The other point which ought to be made is that there is some danger of the negotiations becoming a kind of trade-off where you go for either the single market or free movement of people. As far as British industry and finance are concerned, it is entirely in their interests to secure satisfactory arrangements on both. We ought not to be making a trade-off between one and the other.

[Lord Bridges of Headley]

On the first point, I fear that I have little more to add. As regards financial services, my noble friend makes a very good second point. Again, my right honourable friend the Secretary of State, my other ministerial colleagues and I have been meeting representatives of the financial sector. They have addressed their need for access to talent and access to markets, which brings us on to the issues of passporting and equivalence, and all those points. We are now considering all those matters and noting carefully the points that they are raising.

Bank of England and Financial Services Bill [HL]

Debate between Lord Bridges of Headley and Lord Higgins

Monday 9th November 2015 Lords Chamber

[Lord Bridges of Headley]

My Lords, it is always nice to start off with some sympathy for my position from the noble Lord, Lord Davies. I thank all noble Lords who have spoken and made some very thoughtful contributions. I start by letting your Lordships know that detailed discussions are ongoing between the Bank, the NAO and the Treasury to find a way forward on this issue that all sides find acceptable. These discussions have not yet concluded but I hope to be able to update the Committee before Report.

I should like to set out the Government’s position and will address the amendments and the stand part debate relating to Clause 11 in one fell swoop. However, before I continue, I thank the noble Lord, Lord Bichard. He met me last week and talked me through the amendments that he had hoped to table for today. I thank him for engaging so constructively and I very much hope that that dialogue with me can continue, even if he is unable to contribute to this debate in Committee.

I begin by emphasising that by extending, for the first time, the NAO’s ability to conduct value-for-money reviews of the Bank, the Bill will deliver a significant increase in the transparency and accountability of the Bank to the public and Parliament. The Government are strongly of the view that enhancing the accountability of the Bank of England is in the public interest but it is also in the Bank’s interest—strengthening public trust in the Bank will only add to its credibility.

The issue of how the Bank uses public resources is long running, as my noble friend Lord Higgins said. There has been debate on it ever since the Bank was nationalised in 1946. While researching this debate, I came across correspondence on this issue from my grandfather, who happened to be a Permanent Secretary at the Treasury in 1946 and during the 1950s. So something in the Bridges genes means that we have to deal with these things, although I do not know quite know what that is.

Since the 1950s, the relationship between the Bank and the Government has clearly evolved. Now, we regard the independence of the central bank as critical to our economic security and prosperity. As the noble Lord, Lord McFall, said, independence has been an issue of debate not just here but elsewhere. As Ben Bernanke, a previous chair of the Board of Governors of the Federal Reserve System, said:

“A broad consensus has emerged among policymakers, academics, and other informed observers around the world that the goals of monetary policy should be established by the political authorities, but that the conduct of monetary policy in pursuit of those goals should be free from political control”.

As a number of your Lordships have said, today the Bank of England occupies unique territory in the foundation of the UK economy, and policy decisions by the Bank are of vital importance to everyone. To deliver its mandate effectively, it is essential that the Bank’s independent status is preserved.

The NAO also plays a vital role as Parliament’s auditor. Its own independence is crucial to ensuring that there is effective review of the effectiveness and efficiency of the public sector and for maximising public accountability. Parliament, and in particular the Public Accounts Committee, relies on the work of the NAO to scrutinise properly the value for money of taxpayer-funded activities. It is therefore important that the NAO be allowed to do its work in as unfettered a way as possible.

[Lord Higgins]

The Minister referred to the PAC. On the whole, we seem to be rather short of any input from the PAC, although it is, crucially, using the results of the NAO studies. Would the Minister at least consult them as to whether they have any views on the debate that we are considering now? The PAC has a very definite interest.

[Lord Bridges of Headley]

My noble friend makes a good point and I will be happy to mull it over.

Turing to the Bill, a number of your Lordships expressed concern that the provisions in Clause 11 fetter the independence of the Comptroller and Auditor-General. As your Lordships know, this view is shared by the NAO. Others, including the Bank, have been concerned to ensure that the proposals do not undermine the role of court and infringe upon the vital independence of our central bank. The position put forward in this Bill is therefore one of compromise, as my noble friend Lord Young of Cookham eloquently pointed out. It is a unique arrangement that seeks to strike a balance and protect the independence of two vital public bodies that, unsurprisingly, approach this issue from very different vantage points.

There are two main areas where the arrangements set out in the Bill are different from those that are typically put in place between the NAO and its counterparties. In both cases, the purpose of these special arrangements is to protect the operational independence of the Bank’s policy-making.

First, a bespoke carve-out has been designed to ensure that the Bank’s policy functions are out of the scope of the NAO’s value-for-money reviews. This reflects the differences between the policy objectives of the central bank versus those of a government department. I will turn to this issue in more detail when we come to specific amendments.

Secondly, we have designed the process to unlock disagreements between the Bank and the NAO over what constitutes policy. This is particularly important given the complexity of the Bank’s functions, which makes drawing this distinction especially challenging. To be clear, the process is this: if the court is of the opinion that an NAO review is seeking to examine policy, the court must notify the Comptroller and Auditor-General of its concerns. If, following consultation, the court is still of this opinion, the Comptroller must not proceed with the examination of that area. The Bill also requires that any such disagreement be made public to ensure transparency and to facilitate public and parliamentary scrutiny.

The arrangements set out in Clause 11 seek to increase the accountability of the Bank, while protecting its independent status and recognising the complex nature of its activities. I believe that the proposals are effective and transparent, but this is, as we know, a complicated area. This is why discussions between the Bank, the NAO and the Treasury are ongoing.

I will now turn to the tabled amendments. Amendments 14 and 16 seek to replicate the language of the National Audit Act 1983. It is well understood that the NAO is bound not to consider the merits of the policy objectives of any body with which it engages, but the Government believe this language to be difficult to apply in this specific instance. This is because, as a number your Lordships have said, the Bank of England has a unique role in the United Kingdom economy. The intent of the Bill is to convey the same meaning as set out in the National Audit Act 1983 but phrased in a way that is more applicable in the context of the Bank. Indeed, the policy carve-out is very similar to that which currently applies in the case of NAO oversight of the PRA. The Government do not believe, therefore, that this confuses or obfuscates the boundaries of the Comptroller and Auditor-General’s oversight.

Amendment 15 seeks to remove the requirement that the Comptroller and Auditor-General consult with the court of the Bank before the NAO initiates a value-for-money study. I understand that such consultation is standard practice and consistent with the normal manner in which the NAO goes about its work. The reason why it is particularly important here is due to the role that this Bill establishes for the court of the Bank in determining what constitutes policy. New section 7E in Clause 11 provides that the court may inform the Comptroller and Auditor-General if it considers that a proposed value-for-money study is concerned with the merits of the Bank’s general policy in pursuing its objectives. Consistent with this, the Bill provides that the court must be consulted prior to the initiation of any value-for-money study that the NAO wishes to carry out.

Amendment 17 is concerned with what happens when there is disagreement between the Comptroller and Auditor-General and the court. Clause 11 provides that, should the court continue to be of the opinion that an element of the Comptroller and Auditor-General’s review constitutes policy, the Comptroller and Auditor-General will be unable to proceed with the examination in relation to that policy, and will be unable to include the results of the examination which relate to that policy in any report produced. However, in order to provide the appropriate balance and to protect the role of the Comptroller and Auditor-General, where there is an unresolved disagreement, the nature of this disagreement must be published. This again will open up any disagreements to full parliamentary scrutiny.

A number of your Lordships referred to precedent. I do not believe that this sets a precedent for the NAO. The Bank of England is truly unique, in that no other organisation can claim to be the central bank of the UK or to play such a critical role in our economic prosperity and security.

Finally, I turn to new Section 7H. This does not place any restriction on the Comptroller and Auditor-General’s access to information. Therefore, I do not agree with those who argue that it would restrict the ability of the Comptroller and Auditor-General to examine the Bank fully and openly. This section would be relevant only in narrow circumstances in which the disclosure of certain types of information would be of serious detriment; this includes sensitive information on monetary policy and financial stability, for instance. Both these roles of the Bank are obviously highly market sensitive, and it is straightforward to imagine circumstances in which disclosure of information, even in aggregated form, would undermine financial or economic stability. Section 7H is included in this Bill to protect against such eventualities, while ensuring that the Comptroller and Auditor-General has full access to information held by the Bank. These same limitations apply to the regulators and, indeed, to the external auditors of the Bank. For these reasons, I reject the amendments to Clause 11 and beg that they should not be pressed.

The noble Lord, Lord McFall, raised the issue of the Federal Reserve and its audit. I would like to say briefly that it is important to note that, in the US, the debate is, as I mentioned, far from closed. Indeed, legislators, policymakers and commentators in the US have been engaging for a long while in similar discussions to those that we are having today. Just as in this debate, there are those who want a greater sense of accountability for the central bank and there are those who argue that the sufficient protection of central bank independence is important. Of course, there may be valuable insights to gain through inspecting the accountability frameworks of international central banks. That is something that the Government have done in drafting the legislation, and will continue to do as the Bill develops. But to suggest that there is an easy solution that we can transplant into this system from elsewhere is wrong.

To summarise, the provisions in this clause have rightly attracted a great level of debate. This level of debate is only proper because the provisions concern two incredibly important public bodies, and I expect that we will continue this debate as the Bill progresses. These clauses are an important step in increasing the accountability of the Bank. I ask that this clause stand part of the Bill.